Oil Bottleneck Gives Rockies Cheaper Gasoline

By Beacon Staff

A boom in domestic oil drilling has helped lower U.S. gasoline prices, though the steepest drops have missed California commuters, Midwestern farmers and even New York commodities traders who know all about oil and gasoline pricing.

You have to be in the Rocky Mountains to see the lowest prices — ideally in Casper, the Wyoming city of 56,000 people where gas costs $1 less than what many drivers on the East and West coasts are paying.

At $2.69 a gallon for regular, Casper had the lowest prices of any city on Friday, according to AAA.

Meanwhile, drivers in Montana, Utah, Colorado and New Mexico enjoyed gasoline prices at least 33 cents below the national average of $3.46.

The reason? Cheap Canadian tar sands oil and oil from North Dakota’s booming Bakken shale are pooling in the Rockies because there isn’t enough pipeline capacity to export enough of it to drive down prices elsewhere.

U.S. pipelines generally were built to carry oil from the coasts inland, not the other way, said Michael Green, an AAA gasoline price specialist.

“You have all of these supplies that are building up as well, and they’re trapped in the region,” Green said.

As a result, refineries in the Rockies region are scoring good deals on oil and processing it to be sold at lower prices at the pump. That doesn’t do much good for, say, a Vermont maple syrup producer who might soon be looking to ship from the state with the seventh-highest gasoline prices ($3.66 a gallon) to Connecticut (fifth-highest, $3.79) or New York (second-highest, $3.82).

Hawaii had the most expensive price ($4.13) on Friday followed by California (tied with New York at $3.82).

All of that was OK with Pete Hitch as he recently topped off his SUV for $2.60 a gallon at a Cheyenne truck stop. Hitch was headed from his home in Montana (second-cheapest on Friday, at $3.01) across Wyoming (cheapest, $2.92) to Colorado (fourth-cheapest, $3.114, after Utah, $3.112).

“When I’m heading to Colorado, I buy all my gas here because it’s cheaper,” said Hitch, of Hobson, Mont.

Earlier, he had filled up for $2.45 a gallon in Casper. About 10 miles south of Cheyenne, in Colorado, he faced prices somewhat higher because of higher fuel taxes.

Low to moderate fuel taxes in Rocky Mountain states are part of the equation. Wyoming’s gasoline taxes are second-lowest in the country at 32.4 cents, according to the American Petroleum Institute.

New York has the highest gasoline taxes (69 cents), followed by California (67.1 cents). California also has specially blended — and pricier — gasoline.

While the Rockies aren’t exactly awash in oil, the region’s relative abundance has an effect, said Jim Ritterbusch, president of energy consulting firm Ritterbusch and Associates in Galena, Ill.

“There’s pipeline construction going on all over the place trying to get that crude moved out of North Dakota,” he said. “Most of the interest has been eastward toward the Midwest and trying to get that stuff toward the East Coast.”

Proposed projects such as Calgary-based TransCanada’s 1,700-mile Keystone XL pipeline, which could carry Canadian and potentially North Dakota oil to Gulf Coast refineries, could have a big effect on U.S. oil supplies, he said. Environmental groups oppose Keystone and the project is under review by the State Department.

“It’s all a slow-moving process,” he said. “But it’s all good. We are becoming a big producer of crude oil again.”

In just six years, North Dakota rose from the No. 9 oil-producing state to No. 2, behind only Texas. North Dakota now accounts for about 12 percent of U.S. oil production, up from 1 percent five years ago.

Horizontal drilling and hydraulic fracturing — blasting water, sand and chemicals down wells to split open deposits — made it possible. Much of North Dakota’s oil has to be shipped elsewhere by rail because of the tight pipeline.

There is upward pressure on gas prices. Nationwide, including in the Rockies, gasoline prices are up slightly for the first time since last summer amid higher global oil prices driven by rising global demand, analysts said.

Meanwhile, unpredictable events overseas and closer to home — such as last summer’s California refinery fire and pipeline shutdown that drove prices close to $5 in parts of that state — could drive up prices.

Hitch said he’s not one to let high gasoline prices interfere with his travel plans. “I keep an eye on it, but it doesn’t slow me down, where I’m going or anything,” he said.

His sister in California feels a bit more strongly.

“She complains about it being over $4 most of the time,” Hitch said. “It’s nice to be in a place where it’s cheap.”

Stay Connected with the Daily Roundup.

Sign up for our newsletter and get the best of the Beacon delivered every day to your inbox.